The clear winners among mutual fund families in the recent RRSP season — November 2009 through February 2010 — are those with strong fixed-income and balanced funds, coupled with sales strategies that helped financial advisors and clients deal effectively with volatile markets.
Overall, Toronto-based Dynamic Funds Ltd. led the pack, with total net sales of $1.7 billion, reflecting its concerted effort to deal with these difficult times by maintaining close communications with advisors.
Jordy Chilcott, executive vice president and head of Dynamic Funds, notes that the company had kept its sales force intact during the recession, while other fund companies had cut back. That meant Dynamic was able to provide support to advisors, he says, at a time when it was particularly needed.
In addition, Dynamic is receiving feedback that the credit crisis and market collapse have made advisors more aware of the value of truly active investment management, which Dynamic offers; it has no index funds, closet index funds or exchange-traded funds.
The flight to money market funds that marked the past two RRSP seasons has clearly ended: investors withdrew $9.2 billion from money market funds and put both that and additional monies into long-term funds.
However, not yet certain how solid and smooth the economic recovery will be, many investors have preferred to maintain a position of relative safety by using fixed-income to help create a financial cushion, putting $9.6 billion into balanced funds and $4.9 billion into bond funds.
Consistent with this cautious approach, investors were not ready to plunge back into pure equity funds; indeed, sales in that category were down by $1 billion vs the 2008-09 RRSP season, creating a challenging sales environment for those funds.
Investors also showed a preference this RRSP season for fund families with recent, strong investment performance records. Two companies clustered near the top of the RRSP net sales list also boasted the best overall investment performance in 2009: TD Asset Management Inc. and Fidelity Investments Canada ULC, both of Toronto, have 80% of their long-term assets under management in funds that were ranked in the first or second performance quartiles in 2009.
In addition to its strong investment performance last year, TD also benefited from its reputation for expertise in fixed-income, as investors were on the hunt for proven expertise in lower-risk sectors.
And at Fidelity, Jaimie Harper, executive vice president for advi-sor distribution, observes that these current investment trends “played to our strength.”
Another strong contender in this area is IA Clarington Investments Inc. of Quebec City. Eric Frape, senior vice president for product and business development, points to IA Tactical Income Fund as a successful product. Previously called IA Income Trust Fund, its investment mandate was widened in 2008 to include high-yield bonds, preferred shares, corporate bonds and dividend-paying stocks.
This strategy gave the fund’s managers greater flexibility over the past two years, and the fund has done well as a result. It posted a 33% return for the year ended Dec. 31, 2009.
IA Canadian Balanced Fund has also attracted a lot of money, as have IA’s Target Click funds. The Target Click funds provide guarantees that appeal to risk-averse investors. In particular, the highest monthend value attained over the entire life of the fund is paid to investors at maturity. These are not segregated funds and the guarantee is achieved without insurance.
Funds with a focus on equities were at the other end of the spectrum when it comes to popularity with investors. This was despite strong performances by some of these funds.
Jeff Ray, assistant vice president for mutual funds at Manulife Financial Corp., of Toronto, blames the lack of interest in equity funds for poor sales at Manulife’s AIC Funds, which are mostly equity funds. Net redemptions at AIC were 6.3% of AUM as of Feb. 28, despite their good investment performance in 2009. Indeed, 62.3% of AIC’s long-term AUM is in above-average performing funds.
At Toronto-based Sentry Select Capital Inc., which had the highest net sales as a percentage of AUM — sales were equal to 8.6% of AUM as of Feb. 28 — there was also a strong sales effort. This was partly because the company has changed its focus from closed-end funds to mutual funds in the past couple of years. But Rhonda Klatik, national sales manager at Sentry Select, says the company has always emphasized communication, including face-to-face meetings with investment advisors.